SOUTHWEST AIRLINES Can Luv Rule the World?

Presented by Group 1:

S K Prasad (Roll No.:32)

Himadri Sarkar (Roll No.:17)

G Rajendra (Roll No.:16)

Amit Dubey (Roll No.:04)

About The Southwest

all graphics and information found on Southwest Airlines website at www.iflyswa.com or www.southwest.com

Incorporated in Texas and commenced Customer Service on June

18, 1971 with 3 Boeing 737 aircrafts serving 3 cities – Dallas,

Houston, and San Antonio

The company's stock ticker symbol is LUV (NYSE)

Major domestic airline that provides short haul, high frequency,

point-to-point, low fare service

Today, SW operates over 683 Boeing 737 aircrafts in over 93 cities

Lowest operating cost structure in the domestic airline industry

and consistently offers the lowest and simplest fares

41 years of consecutive profitability

Vision & Mission

all graphics and information found on Southwest Airlines website at www.iflyswa.com or www.southwest.com

Vision

We operate with a Warrior Spirit, a Servant’s Heart, and a

Fun-LUVing Attitude

Mission

The mission of Southwest Airlines is dedication to the highest

quality of Customer Service delivered with a sense of warmth,

friendliness, individual pride, and Company Spirit

Core Values

all graphics and information found on Southwest Airlines website at www.iflyswa.com or www.southwest.com

Landmarks

all graphics and information found on Southwest Airlines website at www.iflyswa.com or www.southwest.com

Landmarks

1971 June 1st Flight

1986 Multimillion dollar training center for flight crew

1994 1st ticketless travel

1996 own 243 aircrafts

1998 fuel hedging strategy

2004 online boarding pass

2006 No. 1 in customer satisfaction

2008 purchase airTrans Airlines (* SWA’s Main Competitor)

Market Share: 4th Largest US Airlines with 15% MS ( 1994-4.4%)

Initial city coverage was 3 , now in over 93 cities

2014 June Southwest operated 683 aircrafts

Southwest-Innovation

all graphics and information found on Southwest Airlines website at www.iflyswa.com or www.southwest.com

1st airline to offer a profit-sharing plan to employees beginning in 1979, employees now own about 10% of company stock

1st major airline to offer “ticketless” travel system-wide

1st major airline to enter information superhighway by creating its own web page

1st airline to offer online booking

No baggage charges for 2nd luggage

No assigned seat cost

Punctuality “Every time on time”

Implemented “LUV & Fun”

Southwest mixes in New Age management techniques, such as celebrating different milestones, and letting love play a part in running the airline

Much of Southwest's success is due to the willingness of its leadership to be innovative. Primary operating philosophy is low fares and lots of flights

Practices for Building High Performance Relationships

1. Leading with credibility and caring

2. Investing in frontline leadership

3. Hiring and training for relational competence

4. Using conflicts to build relationships

5. Bridging the work/family divide

6. Creating boundary spanners

7. Measuring performance broadly,

8. Keeping jobs flexible at the boundaries

9. Establishing partnerships with the unions

10. Building relationships with suppliers

Core Competencies & Competitive Capabilities

Core Competencies & Competitive Capabilities

Key Success Factors

Differentiation Strategy

Others LUV

General

Focused on long route travel Mainly short route journey

Focused on luxury “Fun-LUVing Attitude”

Disciplinary & sophisticated travel

Pets are welcome on Southwest (P.A.W.S)

Cost

Multiple types of aircraft used Single type i.e. Boeing 737

Followed Hub & spoke model Point to point model

More cabin crew (Min 6) Maximum 3 Cabin crew

Differentiation Strategy

• Low-cost meal

• Less turnaround time

• Employee first, Customer second policy

• “Bags fly free” policy

• Ticketless travel

• Early bird check-in

Others strategy

• Use Secondary airports (less congested)

• Operates in mid-sized cities

• Low cost pricing strategy

• No complementary meals

• High utilization rate of fleet

Cost Strategy

Analysis Q1- What Challenges Southwest airlines was facing due to the changes in the business environment?

No international flights

No segmented seating

Dependent on a single producer

Lack of exposure towards online booking agencies

Four out of five employees are members of the union

Carry a small amount of freight and cargo

Do not use chat communication such as e-mail

Do not offer morning flights

Do not operate in bad weather conditioned city

Analysis Q1- What Challenges Southwest airlines was facing due to the changes in the business environment?

Gas and oil price fluctuations

Unable to cater all type of customers as they operate only in

secondary airports

Competition with new entrants in same short haul segments

Existing & new airlines emulating southwest strategy

Decline of leisure travel due to economy and terrorism

Competing online ticket reservation systems

Analysis Q1- What Challenges Southwest airlines was facing due to the changes in the business environment?

New government regulations that make operations costlier

Demand for air travel has dropped sharply since September 11th

Terrorist attacks

Increased restrictions to limit noise (including restrictions on types

of aircraft used and limits on number of operations)

Annual airline security costs have increased

Analysis Q2- What strategy would you like to recommend to southwest to achieve sustainable growth?

Recommendations:

A) Organization Design: The Organic Model

Organization Design Models

The Mechanistic Model

• Emphasizes importance

of achieving high levels

of production and

efficiency through:

– Extensive use of rules

and procedures

– Centralized authority

– High specialization of

labor

The Organic Model

• Emphasizes importance of

achieving high levels of

production and efficiency

through:

– Limited use of rules and

procedures

– Decentralized authority

– Relatively low degrees of

specialization

Comparison of Mechanistic and Organic Structures (1 of 3)

Process Mechanistic Structure Organic Structure

1. Leadership Includes no perceived

confidence and trust

between superiors and

subordinates.

Includes perceived

confidence and trust between

superiors and subordinates.

2. Motivation Taps only physical, security,

and economic motives,

through use of fear and

sanctions.

Taps a full range of motives

through participatory

methods.

3. Communication Information flows downward

and tends to be distorted,

inaccurate, and viewed with

suspicion by subordinates.

Information flows freely:

upward, downward, and

laterally. The information is

accurate and undistorted.

Comparison of Mechanistic and Organic Structures (2 of 3)

Process Mechanistic Structure Organic Structure

4. Interaction Closed and restricted.

Subordinates have little

effect on departmental

goals, methods, and

activities.

Open and extensive. Both

superiors and subordinates

are able to affect

departmental goals, methods,

and activities.

5. Decision Relatively centralized.

Occurs only at the top of

the organization.

Relatively decentralized.

Occurs at all levels through

group processes.

6. Goal setting Located at the top of the

organization, discouraging

group participation.

Encourages group

participation in setting high,

realistic objectives.

Comparison of Mechanistic and Organic Structures (3 of 3)

Process Mechanistic Structure Organic Structure

7. Control Centralized. Emphasizes

fixing blame for mistakes.

Dispersed throughout the

organization. Emphasizes

self-control and problem

solving.

8. Performance

goals

Low and passively sought

by managers, who make

no commitment to

developing the

organization’s human

resources.

High and actively sought by

superiors, who recognize

the need for full commitment

to developing, through

training, the organization’s

human resources.

Analysis Q2- What strategy would you like to recommend to southwest to achieve sustainable growth?

Recommendations:

B) Interorganizational Framework: Collaborative Network

Analysis

Resource Dependence

Population Ecology

Collaborative Network

Institutionalism

Dissimilar Similar C

om

pet

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e

Co

op

era

tive

Org

anis

atio

nal

Re

lati

on

ship

Organisation Type

Analysis

Resource Dependence • Organizations try to minimize their dependence on other organizations

for supply of important resources.

• Focus on independence & autonomy

• Assert control over external resources eg- Purchasing ownership in suppliers, Develop long-term contracts & joint ventures lock in necessary resources

Population Ecology • Organization engaged in similar activities

• Compete for similar resources & customers

• Fill niches left open by established organizations

• Rich variety of new organizational forms benefits society

Analysis

Collaborative Network • Dependent on other organization to increase value & productivity for all

• Exchange of designs, production facility, cost sharing, customers

• More innovations

• Recognized each others strength

Institutionalism • Organizations legitimate themselves in larger environment & design

structure by borrowing ides

• Success & survival through congruence b/w organizations and environment

• Environment is composed of norms & value from stakeholders